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Tax on online services proposed by Salceda

A tax on digital transactions is seriously being considered following a legislative proposal for government to work on it.

According to Finance Secretary Carlos Dominguez III, the tax is being evaluated in its early development.

Dominguez said, “We are prepared to tackle all the intricacies of imposing a tax on digital transactions. We are studying the bill of ways and means chair Jose Maria “Joey” Salceda very carefully and looking into what parts of the digital economy should be taxed.”

House Bill 6765 – An Act Establishing a Fiscal Regime for the Digital Economy – will generate approximately P29 billion, which is intended to support government efforts to address the COVID-19 pandemic.

“Chair Salceda’s bill deals with how we might capture digital purchases into the VAT base and how to absorb profits generated by digital companies into our corporate income tax system,” the Finance chief noted.

There will be no new taxes nor increments in the current tax schedule in the proposed bill as Salceda only wants to expand the tax base.

“Ultimately, having a clear and efficient tax regime for the digital economy will be critical, as more and more taxable transactions shift from traditional means of doing business to more virtual avenues, a trend accelerated by COVID-19,” he explained.

Salceda has said internet marketplace is growing at a fast rate but the government is unable to tap its potential as a tax resource because current definitions do not include online merchants as withholding agents.

The Cabinet official said the Department of Finance and the Bureau of Internal Revenue are studying ways of implementing the proposed tax measure.

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